China 2015: OVERVIEW | Key Themes
Brand value increases 22 percent continuing 5-year growth tend
Chinese brands have come of age.
Over the past five years the value of market-driven brands in the China Top 50 appreciated 278 percent compared with a rise of only 6 percent for SOEs (State Owned Enterprises).
The disproportionate growth rate of market-driven brands suggests that Chinese brand owners are increasingly accomplished at building valuable brands. And key results of this report underscore that assertion:
- Brand value rose 22 percent year-on-year for the Top 100 and 59 percent for the Top 50 over the past five years, outpacing the results of the BrandZTM Global, Latam and Brazil rankings.
- Alibaba shot to number two in the ranking in its first year of eligibility, based on its record IPO, which raised $25 billion on the New York Stock Exchange.
- Tencent claimed the number one position, on a 95 percent year-on-year value rise, surpassing China Mobile, which led the BrandZTM China ranking since its inception in 2011.
Because of sustained brand value growth, two stock portfolios
of the BrandZTM Most Valuable Chinese Brands 2015 significantly outperformed the MSCI China, a weighted index of Chinese stocks, between 2010 and 2014.
But the social and economic context for brands and branding is much different in this BrandZ Top 100 Most Valuable Chinese Brands 2015 than it was when we inaugurated the valuations in 2011, with a study of the Top 50 brands.
Behind the key findings, and across the 21 categories covered in this fifth anniversary edition of the BrandZ report on China’s most valuable brands, the story is more nuanced.
A country of remarkable growth and steady order faced a slower economy and market disruption precipitated in part by government policy from the Third Plenary of November 2013, which moderated expansion to ensure that it would be sustained and equitable.
Some categories, such as technology and retail, exploded with growth. Others felt pressure.
And brands overall – both market- driven and SOEs – turned to innovation and resourcefulness either to sustain growth or strive for advantage in a competitive category.
MORE SOPHISTICATED AND EMPOWERED CONSUMERS
Consumers changed, too.
More experienced and frugal, they’ve become increasingly discriminating, often seeking brands to affirm self-identity rather than project status. And they now see Chinese brands as comparable to multinational brands in many respects.
Trust in brands stabilized after a period of erosion that followed safety breaches in several categories, including food and dairy. Consumer quality and safety expectations have influenced
the production practices and marketing messages of many brands.
And for the first time, consumers accessed the Internet more frequently by mobile than
with a PC device. This shift to mobile intensified the need for brands to perfect ecommerce and be available constantly and seamlessly with well-coordinated O2O, online-to-offline programs.
Ultimately, forces triggered by China’s social and economic rebalancing impacted brands
in every category. The shift in economic driver from production to consumption crystalized the centrality of the consumer and the importance of brand building.
INITIATIVES VARY BY CATEGORY
As government austerity measures impacted business travel, hotel brands continued to expand rapidly. But they focused more on the budget and mid-price segments of the market for leisure travelers, and expanded electronic booking systems.
With less extravagant official government events and gift giving, brands of baijiu, the traditional white alcohol, lowered prices, repositioned from premium to mid-market and explored overseas sales. Baijiu brands also expanded both online and physical distribution channels.
Banking reforms opened the way for more market-driven banks to enter the category. Banks also faced competition from non-banking entities introducing financial products. Ecommerce giant Alibaba offered micro loans, for example.
Banks responded in many ways, including: expanding the focus on wealth management for private banking clients; and developing online banking presence, often with mobile apps made available through partner Internet brands.
TECHNOLOGY BRANDS COMPETE FOR ECOSYSTEMS
Local quotas on car purchases, in an effort to control air pollution, impacted sales in some cities. But incentives for buying environmentally friendly vehicles drove sales of hybrids by brands like BYD.
Some consolidation occurred
in the real estate and apparel categories, and in food and dairy, where brands sought to build greater scale to face global competitors at home or abroad.
In an unfavorable climate of higher interest rates and slower real estate development, home appliance brands focused
on producing innovative
smart products, emphasizing performance rather than price.
Appliance brands also continued to gain overseas sales both
as producers for other brand marketers and increasingly
under their own brand names. Two Chinese technology brands, Lenovo and ZTE, derived over half of their revenue from overseas business.
But even technology brands that enjoyed high brand value and growth faced challenges – from each other. The BAT
brands – Baidu, a search engine; Alibaba, an ecommerce site; and Tencent, a portal
– expanded from their core competencies to enter each other’s domain.
Through alliances and acquisitions, each attempted to become the default Internet ecosystem, the one-stop destination where customers could satisfy all their needs for search, news and entertainment, ecommerce, banking, email and myriad other services.
THE BROADER CONTEXT
The coming of age for brands is both full of possibilities and fraught with changing market dynamics including: more brand extension; increased innovation; the application of digital and technology throughout business operations; greater focus on going global and an attempt to restore consumer trust.
This report explores these dynamics in depth and also places them in the broader context of Brand China, the overall perception of Chinese brands, and the Chinese Dream, a national vision of a more prosperous and equitable modern China informed by the values and teachings of its 5,000-year-old civilization.
Brand China and the Chinese Dream are linked in a virtuous cycle. The pursuit of the Chinese dream drives the evolution of Brand China. And the increasingly innovative and higher quality products of Brand China help transform the Chinese Dream into reality.